Abstract

Differences in regional labour market conditions are still pronounced in Germany. The disparities are mainly marked by disparities between the Eastern and the Western part of the country. Frequently low labour mobility is blamed for the persistent differences in unemployment and income on the regional level. Traditional neoclassical models imply that labour mobility should reduce disparities. In contrast, models that include externalities or selective migration suggest that regional differences in wages and unemployment might well increase due to interregional migration of workers. Thus, theory does not allow drawing clear-cut conclusion regarding the impact of labour mobility on regional disparities. We investigate the impact of labour mobility on regional disparities in Germany focussing on the differences between East and West (NUTS3 Level). Both effects on regional wages and unemployment are considered. In our regression models we consider net migration rates as well as differentiated effects of in- and outmigration. Furthermore, we do not restrict our analysis to the impact of migration but allow for the influence of commuting flows as well. Moreover, we take into account the qualification of migrants and commuters since theory indicates that qualification might matter for the impact of mobility.